Tax Law Improvement Act (No. 1) 1998 (46 of 1998)

Schedule 1   Amendment of the Income Tax Assessment Act 1997

1   Part 3-3 Division 149

Division 149 - When an asset stops being a pre-CGT asset

Table of Subdivisions

149-A Key concepts

149-B When asset of non-public entity stops being a pre-CGT asset

149-C When asset of public entity stops being a pre-CGT asset

149-D How to treat holdings of less than 1% in certain entities

149-E How to treat certain interposed funds, companies and government bodies

149-F How to treat a "demutualised" public entity

Subdivision 149-A - Key concepts

Table of sections

149-10 What is a pre-CGT asset?

149-15 Majority underlying interests in a CGT asset

149-10 What is a pre-CGT asset?

A *CGT asset that an entity owns is a pre-CGT asset if, and only if:

(a) the entity last acquired the asset before 20 September 1985; and

(b) the entity was not, immediately before the start of the 1998-99 income year, taken under:

(i) subsection 160ZZS(1) of the Income Tax Assessment Act 1936; or

(ii) Subdivision C of Division 20 of Part IIIA of that Act;

to have acquired the asset on or after 20 September 1985; and

(c) the asset has not stopped being a pre-CGT asset of the entity because of this Division.

Note: There are transitional rules for assets that stopped being pre-CGT assets under the Income Tax Assessment Act 1936: see section 149-5 of the Income Tax (Transitional Provisions) Act 1997.

149-15 Majority underlying interests in a CGT asset

(1) Majority underlying interests in a *CGT asset consist of:

(a) more than 50% of the beneficial interests that *ultimate owners have (whether directly or *indirectly) in the asset; and

(b) more than 50% of the beneficial interests that *ultimate owners have (whether directly or *indirectly) in any *ordinary income that may be *derived from the asset.

(2) An underlying interest in a *CGT asset is a beneficial interest that an *ultimate owner has (whether directly or *indirectly) in the asset or in any *ordinary income that may be *derived from the asset.

(3) An ultimate owner is:

(a) an individual; or

(b) a company whose *constitution prevents it from making any distribution, whether in money, property or otherwise, to its members; or

(c) the Commonwealth, a State or a Territory; or

(d) a municipal corporation; or

(e) a local governing body; or

(f) the government of a foreign country, or of part of a foreign country.

(4) An *ultimate owner indirectly has a beneficial interest in a *CGT asset of another entity (that is not an *ultimate owner) if he, she or it would receive for his, her or its own benefit any of the capital of the other entity if:

(a) the other entity were to distribute any of its capital; and

(b) the capital were then successively distributed by each entity interposed between the other entity and the ultimate owner.

(5) An *ultimate owner indirectly has a beneficial interest in *ordinary income that may be *derived from a *CGT asset of another entity (that is not an *ultimate owner) if he, she or it would receive for his, her or its own benefit any of a *dividend or income if:

(a) the other entity were to pay that dividend, or otherwise distribute that income; and

(b) the dividend or income were then successively paid or distributed by each entity interposed between the other entity and the ultimate owner.

Subdivision 149-B - When asset of non-public entity stops being a pre-CGT asset

Table of sections

149-25 Which entities are affected

149-30 Effects if asset no longer has same majority underlying ownership

149-35 Cost base elements of asset that stops being a pre-CGT asset

149-25 Which entities are affected

This Subdivision provides for when a *CGT asset of an entity stops being a *pre-CGT asset (unless the entity is covered by section 149-50).

Note: Subdivision 149-C deals with when an asset of such an entity stops being a pre-CGT asset.

149-30 Effects if asset no longer has same majority underlying ownership

(1) The asset stops being a *pre-CGT asset at the earliest time when *majority underlying interests in the asset were not had by *ultimate owners who had *majority underlying interests in the asset immediately before 20 September 1985. Also, Part 3-1 and this Part (except this Division) apply to the asset as if the entity had acquired it at that earliest time.

(2) If the Commissioner is satisfied, or thinks it reasonable to assume, that at all times on and after 20 September 1985 and before a particular time *majority underlying interests in the asset were had by *ultimate owners who had *majority underlying interests in the asset immediately before that day, subsection (1) applies as if that were in fact the case.

New owner standing in shoes of former owner

(3) Subsection (4) affects how the *majority underlying interests in the asset are worked out if an *ultimate owner (the new owner ) has acquired a percentage (the acquired percentage ) of the *underlying interests in the asset because of an event described in column 2 of an item in the table. The former owner is the entity described in column 3 of that item.

(4) This section applies as if the new owner had (in addition to any other *underlying interests), at any time when the former owner had a percentage (the former owner's percentage ) of the underlying interests in the asset, a percentage of the underlying interests in the asset equal to the acquired percentage, or the former owner's percentage at that time, whichever is the less.

149-35 Cost base elements of asset that stops being a pre-CGT asset

(1) This section affects the *cost base and *reduced cost base of the asset if it stops being a *pre-CGT asset.

(2) The first element of each is the asset's market value at the time referred to in subsection 149-30(1).

Subdivision 149-C - When asset of public entity stops being a pre-CGT asset

Table of sections

149-50 Which entities are affected

149-55 Entity to determine periodically whether asset still has same majority underlying ownership

149-60 What the determination must show

149-65 Effects of not making the determination

149-70 Effects if asset no longer has same majority underlying ownership

149-75 Cost base elements of asset that stops being a pre-CGT asset

149-80 No further determination needed after asset stops being a pre-CGT asset

149-50 Which entities are affected

(1) This Subdivision provides for when a *CGT asset of an entity of any of these kinds stops being a *pre-CGT asset:

(a) a company *shares in which (except shares that carry the right to a fixed rate of *dividend) are listed for quotation in the official list of an *approved stock exchange;

(b) a *publicly traded unit trust;

(c) a *mutual insurance company;

(d) a *mutual affiliate company;

(e) a company (other than one covered by paragraph (a)) all the *shares in which are beneficially owned by one or more of the following:

(i) a company covered by paragraph (a);

(ii) a *mutual insurance company;

(iii) a *mutual affiliate company;

(iv) a *publicly traded unit trust;

(f) a *100% subsidiary of a company covered by paragraph (e).

(2) A publicly traded unit trust is a unit trust the units in which:

(a) are listed for quotation in the official list of an *approved stock exchange; or

(b) are ordinarily available for subscription or purchase by the public.

(3) This Division applies as if what is done or not done by the trustee of a *publicly traded unit trust had been done or not done by the trust.

149-55 Entity to determine periodically whether asset still has same majority underlying ownership

(1) Within 6 months after each *test day, the entity must examine its records to make a determination about the *majority underlying interests in the asset at the end of that day. (The Commissioner can extend the period for making the determination.)

Test days

(2) Each of these days is a test day :

(a) a day that is 5 years (or a multiple of 5 years) after 20 January 1997 (but see subsection (3));

(b) if the entity is covered by paragraph 149-50(1)(a), (e) or (f) - a day on which there is *abnormal trading in *shares in the company;

(c) if the entity is a *publicly traded unit trust - a day on which there is *abnormal trading in units in the trust;

(d) if the entity is a company all the *shares in which are beneficially owned:

(i) by a company *shares in which (except shares that carry the right to a fixed rate of *dividend) are listed for quotation in the official list of an *approved stock exchange; or

(ii) by a *publicly traded unit trust;

a day on which there is *abnormal trading in *shares in the other company or in units in that unit trust;

(e) if the entity is a 100% subsidiary of a company of the kind first mentioned in paragraph (d) - a day on which there is *abnormal trading in *shares in the company referred to in subparagraph (d)(i) or in units in that unit trust.

Note: Subsections (6) and (7) change the normal rules about abnormal trading.

(3) If a day (the fifth anniversary ) that would otherwise be a *test day because of paragraph (2)(a) is:

(a) a Saturday; or

(b) a Sunday; or

(c) a day that is a public holiday or a bank holiday in the place where the records of ownership of shares or other interests in the entity are kept;

the next day that is not covered by a paragraph of this subsection is a test day instead of the fifth anniversary.

Determining the end of a day

(4) For the purposes of this section, the end of a day is determined according to legal time in the place where the records of ownership of shares or other interests in the entity are kept.

Special rules about abnormal trading

(5) Subsections (6) and (7) change how Subdivision 960-H applies for the purposes of determining under this section whether there is *abnormal trading in *shares in a company or in units in a unit trust.

(6) An issue, redemption or transfer, or any other dealing, is a trading if, and only if, it changes the respective proportions in which *ultimate owners have *underlying interests in *CGT assets of the company or trust.

(7) Section 960-235 (about suspected transactions involving 5% or more of *shares in the company or units in the trust) is disregarded.

149-60 What the determination must show

(1) The determination must show whether, at the end of the *test day, *majority underlying interests in the asset were had by *ultimate owners who also had *majority underlying interests in the asset at the end of the starting day. The starting day is:

(a) a day the entity chooses under subsection (2); or

(b) if no day is so chosen - 19 September 1985.

(2) The day chosen:

(a) must be no earlier than 1 July 1985 and no later than 30 June 1986; and

(b) must be one the choice of which will result in a determination that gives a reasonable approximation of the *ultimate owners who had *underlying interests in the assets of the entity at the end of 19 September 1985.

How unidentified owners are treated

(3) So far as the entity cannot identify from examining its records who had *underlying interests in the asset at the end of the *starting day, it must make the determination on the basis that those interests were then had by *ultimate owners who did not have *underlying interests in the asset at the end of the *test day.

New owner standing in the shoes of former owner

(4) Subsection (5) affects how the entity must make the determination if an *ultimate owner (the new owner ) has acquired a percentage (the acquired percentage ) of the *underlying interests in the asset because of an event described in column 2 of an item in the table. The former owner is the entity described in column 3 of that item.

(5) The entity must make the determination on the basis that the new owner had (in addition to any other *underlying interests), at any time when the former owner had a percentage (the former owner's percentage ) of the *underlying interests in the asset, a percentage of the underlying interests in the asset equal to the acquired percentage, or the former owner's percentage at that time, whichever is the less.

Determining the end of a day

(6) For the purposes of this section, the end of a day is determined according to legal time in the place where the records of ownership of shares or other interests in the entity are kept.

149-65 Effects of not making the determination

(1) The asset stops being a *pre-CGT asset if the entity fails to make the determination as required by this Division.

(2) Also, Part 3-1 and this Part (except this Division) apply to the asset as if the entity had acquired it at the end (as determined under subsection 149-55(4)) of the last *test day before the one for which the determination was required to be made.

(3) However, if the *test day is the first one after the entity began to be covered by section 149-50 (which lists the entities affected by this Division), Part 3-1 and this Part (except this Division) apply to the asset as if the entity had acquired it when the entity began to be covered by that section.

149-70 Effects if asset no longer has same majority underlying ownership

(1) The asset stops being a *pre-CGT asset if the determination shows that at the end of the *test day *majority underlying interests in the asset were not had by *ultimate owners who had *majority underlying interests in the asset at the end of the *starting day.

(2) Also, Part 3-1 and this Part (except this Division) apply to the asset as if the entity had acquired it at the end of the *test day (as determined under subsection 149-55(4)).

(3) However, disregard subsections (1) and (2) if the Commissioner is satisfied, or thinks it reasonable to assume, that at the end of the *test day *majority underlying interests in the asset were had by *ultimate owners who had *majority underlying interests in the asset at the end of the *starting day.

149-75 Cost base elements of asset that stops being a pre-CGT asset

(1) This section affects the *cost base and *reduced cost base of the asset if it stops being a *pre-CGT asset.

(2) The first element of each is the asset's market value at the time referred to in subsection 149-65(2) or (3) or 149-70(2), as appropriate.

(3) The other elements do not include any expenditure before the time when the entity is taken to have acquired the asset.

149-80 No further determination needed after asset stops being a pre-CGT asset

After the asset stops being a *pre-CGT asset, the entity need not make a further determination about it under section 149-55.

Subdivision 149-D - How to treat holdings of less than 1% in certain entities

Guide to Subdivision 149-D

149-100 What this Subdivision is about

If the entity is a company covered by paragraph 149-50(1)(a), (e) or (f) or a publicly traded unit trust, this Subdivision has rules that make it easier for it to determine who had underlying interests in the asset.

Table of sections

149-105 Basic principles

Special tracing rules for certain companies and publicly traded unit trusts

149-110 Holdings of less than 1% in the entity

149-115 Holdings of less than 1% in interposed company or unit trust

149-120 Notional single shareholder or unitholder of head entity

149-125 Notional single shareholder or unitholder of interposed company or trust

149-130 Notional shareholder taken to have minimum rights to distributions

149-135 Income and capital unitholding of less than 1%

When the rules in this Subdivision do not apply

149-140 If company or unit trust would not otherwise pass the continuity of ownership test

149-105 Basic principles

(1) All holdings of shares or units of less than 1% in the entity are treated as if they were held by a single notional individual. This means that the entity does not have to trace through to the actual ultimate owners who have underlying interests in the asset.

(2) A similar rule applies if another company covered by paragraph 149-50(1)(a), (e) or (f) or publicly traded unit trust is interposed between the entity and those ultimate owners. All holdings of less than 1% in the interposed company or trust are treated as if they were held by a different single notional individual.

(3) This means that the entity does not have to trace through the interposed company or trust to the actual ultimate owners who have underlying interests in the asset.

Note: The rules in this Subdivision may not apply if they would hide a change in majority underlying interests in the asset: see section 149-140.

[This is the end of the Guide.]

Special tracing rules for certain companies and publicly traded unit trusts

149-110 Holdings of less than 1% in the entity

(1) If the entity (the head entity ) is a company covered by paragraph 149-50(1)(a), (e) or (f) or a *publicly traded unit trust, this Subdivision modifies how it may determine under section 149-60 the *ultimate owners who had *underlying interests in the asset at a particular time.

(2) If the entity is a company, there must have been at that time:

(a) *dividend shareholdings of less than 1% in it; or

(b) *capital shareholdings of less than 1% in it.

(3) If the entity is a unit trust, there must have been at that time:

(a) *income unitholdings of less than 1% in it; or

(b) *capital unitholdings of less than 1% in it.

149-115 Holdings of less than 1% in interposed company or unit trust

(1) This Subdivision also modifies how the head entity may determine under section 149-60 the *ultimate owners who had *underlying interests in the asset at a particular time if, at that time:

(a) the head entity was a company covered by paragraph 149-50(1)(a), (e) or (f) or a *publicly traded unit trust; and

(b) another entity (an interposed company or trust ) was such a company or unit trust and met the condition in subsection (2) and the one in either subsection (3) or (4).

(2) The interposed company or trust must have been interposed between the head entity and *ultimate owners who *indirectly had beneficial interests in the asset or in any *ordinary income that may be derived from the asset.

(3) In the case of a company, there must have been:

(a) *dividend shareholdings of less than 1% in it; or

(b) *capital shareholdings of less than 1% in it.

(4) In the case of a unit trust, there must have been:

(a) *income unitholdings of less than 1% in it; or

(b) *capital unitholdings of less than 1% in it.

149-120 Notional single shareholder or unitholder of head entity

Notional single shareholder

(1) If the head entity is a company, it may make the determination on the basis that a single notional individual (the notional holder ) had the right to receive, for his or her own benefit and directly:

(a) any *dividends it may pay in respect of each *dividend shareholding of less than 1% in the entity at that time; and

(b) any distributions of capital of the entity in respect of each *capital shareholding of less than 1% in the entity at that time.

(2) If the head entity makes the determination on the basis mentioned in subsection (1), it must also make it on the basis that the *ultimate owners who at that time had the right to receive for their own benefit (whether directly, or *indirectly through one or more interposed entities):

(a) any *dividends the entity may pay in respect of each *dividend shareholding of less than 1% in the entity at that time; and

(b) any distributions of capital of the entity in respect of each *capital shareholding of less than 1% in the entity at that time;

did not have that right.

Notional single unitholder

(3) If the head entity is a unit trust, it may make the determination on the basis that a single notional individual (the notional holder ) had the right to receive, for his or her own benefit and directly:

(a) any income that the entity may distribute in respect of each *income unitholding of less than 1% in the entity at that time; and

(b) any distributions of capital of the entity in respect of each *capital unitholding of less than 1% in the entity at that time.

(4) If the head entity makes the determination on the basis mentioned in subsection (3), it must also make it on the basis that the *ultimate owners who at that time had the right to receive for their own benefit (whether directly, or *indirectly through one or more interposed entities):

(a) any income that the entity may distribute in respect of each *income unitholding of less than 1% in the entity at that time; and

(b) any distributions of capital of the entity in respect of each *capital unitholding of less than 1% in the entity at that time;

did not have that right.

149-125 Notional single shareholder or unitholder of interposed company or trust

Notional shareholder

(1) The entity may make the determination on the basis that, for each interposed company that is covered by paragraph 149-50(1)(a), (e) or (f), a different single notional individual (the notional holder ) had the right to receive, for his or her own benefit and directly:

(a) any *dividends the interposed company may pay in respect of each *dividend shareholding of less than 1% in the interposed company at that time; and

(b) any distributions of capital of the interposed company in respect of each *capital shareholding of less than 1% in the interposed company at that time.

(2) If the head entity makes the determination on the basis mentioned in subsection (1), it must also make it on the basis that the *ultimate owners who at that time had the right to receive for their own benefit (whether directly, or *indirectly through one or more interposed entities):

(a) any *dividends the interposed company may pay in respect of each *dividend shareholding of less than 1% in the interposed company at that time; and

(b) any distributions of capital of the interposed company in respect of each *capital shareholding of less than 1% in the interposed company at that time;

did not have that right.

Notional unitholder

(3) The entity may make the determination on the basis that, for each interposed trust that is a *publicly traded unit trust, a different single notional individual (the notional holder ) had the right to receive, for his or her own benefit and directly:

(a) any income that the interposed trust may distribute in respect of each *income unitholding of less than 1% in the interposed trust at that time; and

(b) any distributions of capital of the interposed trust in respect of each *capital unitholding of less than 1% in the interposed trust at that time.

(4) If the head entity makes the determination on the basis mentioned in subsection (3), it must also make it on the basis that the *ultimate owners who at that time had the right to receive for their own benefit (whether directly, or indirectly through one or more interposed entities):

(a) any income that the interposed trust may distribute in respect of each *income unitholding of less than 1% in the interposed trust at that time; and

(b) any distributions of capital of the interposed trust in respect of each *capital unitholding of less than 1% in the interposed trust at that time.

did not have that right.

149-130 Notional shareholder taken to have minimum rights to distributions

If:

• the percentage of the distributions of capital, dividends or income of the head entity, or of the interposed company or trust, that the notional holder had the right to receive at that time;

is greater than:

• the percentage (the lower percentage ) of the distributions of capital, dividends or other income of the head entity, or of the interposed company or trust, that the notional holder had the right to receive at the end of the *starting day (as determined under subsection 149-60(6));

the notional holder is taken to have the right to receive the lower percentage of the distributions of capital, dividends or other income at that time.

149-135 Income and capital unitholding of less than 1%

Meaning of income unitholding of less than 1%

(1) If all the units in a unit trust of which an entity is the registered holder at a particular time carry (between them) the right to receive less than 1% of any distribution of income of the trust, those units constitute an income unitholding of less than 1% in the trust at that time.

Meaning of capital unitholding of less than 1%

(2) If all the units in a unit trust of which an entity is the registered holder at a particular time carry (between them) the right to receive less than 1% of any distribution of capital of the trust, those units constitute a capital unitholding of less than 1% in the trust at that time.

When the rules in this Subdivision do not apply

149-140 If company or unit trust would not otherwise pass the continuity of ownership test

(1) This Subdivision does not apply for the purposes of a determination under section 149-55 if the Commissioner decides that it is reasonable to assume that at the end of the *test day *majority underlying interests in the asset were not had by *ultimate owners who had *majority underlying interests in the asset at the end of the *starting day.

(2) If the Commissioner so decides after the head entity has already made the determination on the basis of a rule in this Subdivision, the determination is taken never to have been made.

Note: The head entity may still have time to make a fresh determination, or the Commissioner may extend the time for making one: see subsection 149-55(1).

Subdivision 149-E - How to treat certain interposed funds, companies and government bodies

Guide to Subdivision 149-E

149-145 What this Subdivision is about

If the entity is a company covered by paragraph 149-50(1)(a), (e) or (f) or a publicly traded unit trust, this Subdivision has rules that make it easier for it to determine who had underlying interests in the asset.

The entity does not have to trace through complying superannuation funds, complying approved deposit funds, companies of certain kinds, or government bodies, that are interposed between the entity and the ultimate owners who have underlying interests in the asset.

Table of sections

Special tracing rules for certain companies and publicly traded unit trusts

149-150 When certain funds, companies or government bodies are taken to have rights to capital, dividends or other income

149-155 Limits on tracing through interposed fund or body

[This is the end of the Guide.]

Special tracing rules for certain companies and publicly traded unit trusts

149-150 When certain funds, companies or government bodies are taken to have rights to capital, dividends or other income

(1) If the entity (the head entity ) is a company covered by paragraph 149-50(1)(a), (e) or (f) or a *publicly traded unit trust, and the conditions in this section are met, this Subdivision modifies how it may determine under section 149-55 the *ultimate owners who had *underlying interests in the asset at a particular time.

(2) An entity of any of these kinds (the interposed fund or body ):

(a) a *superannuation fund;

(b) an *approved deposit fund;

(c) a *mutual insurance company;

(d) a *mutual affiliate company;

(e) a company whose *constitution prevents it from making any distribution, whether in money, property or otherwise, to its members;

(f) a company that is prescribed by the regulations;

(g) the Commonwealth, a State or a Territory;

(h) a municipal corporation

(i) a local governing body;

(j) the government of a foreign country, or of part of a foreign country;

must have been interposed at that time between the head entity and *ultimate owners.

(3) At that time, those *ultimate owners must have had the right to receive for their own benefit, and *indirectly through the interposed fund or body (or through entities including it):

(a) a percentage of any distributions of capital of the head entity; or

(b) a percentage of any *dividends that the head entity may pay or any income that the head entity may distribute.

(4) If the interposed fund or body is a *superannuation fund, it must have been a *complying superannuation fund, or *a foreign superannuation fund, at the end of the *test day to which the determination relates.

(5) If the interposed fund or body is an *approved deposit fund, it must have been a *complying approved deposit fund at the end of the *test day to which the determination relates.

149-155 Limits on tracing through interposed fund or body

Interposed fund or body has more than 50 members or is a government body

(1) If:

(a) the interposed fund or body had more than 50 members at that time; or

(b) the interposed fund or body is covered by any of paragraphs 149-150(2)(g) to (j) (which describe certain Australian and foreign government bodies);

the head entity may make the determination on the basis that the interposed fund or body was at that time an individual who had the right to receive, for his or her own benefit, the percentage of distributions, *dividends or income mentioned in paragraph 149-150(3)(a) or (b).

If fund or special company has not more than 50 members

(2) Otherwise, the head entity may make the determination on the basis that each member of the interposed fund or body was at that time an individual who had a right to receive, for his or her own benefit, an equal proportion of the percentage of distributions, *dividends or income mentioned in paragraph 149-150(3)(a) or (b).

Persons who actually had the right are taken not to have had it

(3) If the head entity makes the determination on the basis mentioned in subsection (1) or (2), it must also make it on the basis that the *ultimate owners who at that time had the right mentioned in subsection 149-150(3) did not have that right (except as provided by subsection (2) of this section).

Subdivision 149-F - How to treat a "demutualised" public entity

Table of sections

149-165 Members treated as having underlying interests in assets until demutualisation

149-170 Effect of demutualisation of interposed company

149-165 Members treated as having underlying interests in assets until demutualisation

(1) This section modifies how the entity may determine under section 149-60 the *ultimate owners who had *underlying interests in the asset at a particular time if the entity:

(a) was:

(i) a *mutual insurance company; or

(ii) a *mutual affiliate company;

at the end of the *starting day (as determined under subsection 149-60(6)); and

(b) has since stopped being a company of either of those kinds, but has continued in existence as either a company covered by paragraph 149-50(1)(a), (e) or (f) or a *publicly traded unit trust; and

(c) when it stopped being an entity of either of those kinds (the stopping time ), had more than 50 members.

(2) The entity may make the determination on the basis that an *ultimate owner who:

(a) immediately before the stopping time was a member of the entity; and

(b) immediately after the stopping time had an *underlying interest in the asset;

had the interest at all times from and including the end of the *starting day until immediately after the stopping time.

149-170 Effect of demutualisation of interposed company

(1) This section modifies how the entity (the head entity ) may determine under section 149-60 the *ultimate owners who had *underlying interests in the asset at a particular time if another entity (the interposed company ):

(a) was:

(i) a *mutual insurance company; or

(ii) a *mutual affiliate company;

at the end of the *starting day (as determined under subsection 149-60(6)) for the head entity; and

(b) has since stopped being a company of either of those kinds, but has continued in existence as either a company covered by paragraph 149-50(1)(a), (e) or (f) or a *publicly traded unit trust; and

(c) when it stopped being an entity of either of those kinds (the stopping time ), had more than 50 members.

(2) The head entity may make the determination on the basis that an *ultimate owner who:

(a) immediately before the stopping time was a member of the interposed company; and

(b) immediately after the stopping time had, through the interposed company, an *underlying interest in the asset;

had the interest at all times from and including the end of the *starting day until immediately after the stopping time.

[The next Part is Part 3-5.